The West Virginia Coal Economy: A Report

Joint Committees on Finance
West Virginia Legislature
February 18, 2010
Used by Sharon Spencer to Create Awareness
 

Report Overview:

• Definitive report on the role of coal in the West Virginia economy in 2008
• Includes data from federal and state agencies with appropriate citations
• Analytical framework widely accepted by economists
• Collaborative project between Marshall University and West Virginia University
   

Looking Ahead:

• The coal economy provides significant tax revenues to state and local governments
• The coal economy is a very important in West Virginia contributing significant employment, employee compensation and value added
• Proposed environmental policies affecting the coal economy represent a significant economic threat to communities and the state
   

Defining the Coal Economy

Definition from industry perspective

• Industry has become more complex due to technology
• Expanded use of contract employees and contractors

Definition from an economist perspective

• Role of the North American Industrial Classification System
• Role of federal and state statistical systems
   

Coal Industry and Reserve Owners Pay Significant Property Taxes

Real Property Taxes Paid $36 million

• Producing property $19.7 million
• Non-producing property $13.3 million
• Buildings and Land $3.0 million

Personal Property Taxes Paid $54.8 Million

Property Tax Revenues are Critical to County Governments

• Primary source of funding for many county governments in the state
• Boone County loses half its tax base and other coal producing counties would not be able to finance basic functions
• Reduction or elimination would impair viability of school, county and municipal bond issues and excess levies.

Coal Industry Major Contributor to the WV General Revenue Fund  

• Severance $412.7 million
• Corporate Net Income $25.6 million
• Sales and Use Taxes $3.6 million
• Personal Income Taxes $46.0 million
• Total General Revenue Fund $487.9 million
   

Other Taxes Paid by the Coal Industry

• Workers compensation $80.0 million
• Special reclamation taxes $13.6 million
• Coal Resource Transportation Road Fund $3.9 million
• Does not include other fees such as permits paid by the industry
   

Tax Summary

• Taxes on the coal industry were estimated to be 12.5 per cent of the WV General Revenue Fund in 2008
• Taxes on coal production totaled $4.29 per ton, which is the highest in the nation
• The fiscal viability of State and local governments depend on the viability of the coal industry
• The coal economy also generates other tax revenues, which are not estimated in our study
   

Coal Exports

• Exports are best way to stimulate a state’s economy
• Coal exports were $2.1 billion in 2008 or 37 per cent of WV total exports
• Met coal accounts for the majority of exports
   

What is the Economic Contribution of the Coal Economy?

• Application of economic impact modeling system
• Types of impacts:
  - Direct
  - Indirect and induced
  - Total

• Backward and forward linkages
• Examples
   

 

Table 16: Economic Impact Coal Summary 2008  BUSINESS VOLUME (millions 2008 $)
	Direct	Indirect and Induced	Total
Industry Impact
Coal Mining (NAICS 2121)	$7,450.0	$12,300.0	$19,780.0
Additional Impacts
Taxes Paid by Coal Mining Industry	$518.8	$814.8	$1,333.6
Rail Transportation of WV Coal	$1,000.8	$1,608.8	$2,609.6
Water Transportation of WV Coal	$312.1	$456.7	$768.8
Electricity Generation with WV Coal	$279.3	$394.7	$674.0
Total	$9,561.0	$15,575.0	$25,166.0
Note: Columns may not sum to totals due to rounding.

 

TABLE 17: Economic Impact Coal Summary 2008  TOTAL VALUE ADDED (millions 2008 $)
	Direct	Indirect and Induced	Total
Industry Impact
Coal Mining (NAICS 2121)	$4,060.0	$1,870.0	$5,930.0
Additional Impacts
Taxes Paid by Coal Mining Industry	$330.9	$128.5	$459.4
Rail Transportation of WV Coal	$579.9	$224.4	$804.3
Water Transportation of WV Coal	$82.9	$456.7	$768.8
Electricity Generation with WV Coal	$212.3	$47.6	$259.9
Total	$5,266.0	$2,341.4	$7,607.4
Note: Columns may not sum to totals due to rounding.

 

TABLE 18: Economic Impact Coal Summary 2008  EMPLOYEE COMPENSATION (millions 2008 $)
	Direct	Indirect and Induced	Total
Industry Impact
Coal Mining (NAICS 2121)	$1,950.0	$870.0	$2,820.0
Additional Impacts
Taxes Paid by Coal Mining Industry	$238.9	$55.0	$293.9
Rail Transportation of WV Coal	$248.7	$110.8	$359.5
Water Transportation of WV Coal	$43.0	$37.1	$80.1
Electricity Generation with WV Coal	$57.9	$20.0	$78.0
Total	$2,538.5	$1,092.9	$3,631.5
Note: Columns may not sum to totals due to rounding.

 

TABLE 19: Economic Impact Coal Summary 2008  EMPLOYMENT (Jobs)
	Direct	Indirect and Induced	Total
Industry Impact
Coal Mining (NAICS 2121)	20,500.0	23,500.0	43,800
Additional Impacts
Taxes Paid by Coal Mining Industry	5,800	1,700	7,500
Rail Transportation of WV Coal	2,700	4,200	6,900
Water Transportation of WV Coal	600	1,400	2,000
Electricity Generation with WV Coal	520	730	1,250
Total	30,120	31,530	61,450
Note: Columns may not sum to totals due to rounding.

 

TABLE 20: Tax Impact of Coal Summary 2008 (millions $)
	Direct	Indirect and Induced	Total
Industry Impact
Coal Mining (NAICS 2121)	$676.251	$25.91	$702.16
Additional Impacts
Rail Transportation of WV Coal	-	$13.09	$13.09
Water Transportation of WV Coal	-	$2.93	$2.93
Electricity Generation with WV Coal	-	$3.47	$3.47
Total	$676.25	$45.40	$721.65
1: Taxes directly paid by the coal industry are listed in detail on Table 3. Note: Indirect and induced taxes paid to the state include: sales and use taxes, personal income taxes, business franchise and corporate net income taxes. Note: Columns may not sum to totals due to rounding.

Additional Observations on Estimates of the Coal Economy

• Some sectors were not measureable
  -Trucking
  - Contractors whose primary business was not classified in standard NAICS code 2121
  - Downstream firms using coal that otherwise would not be located in the state
• Study omits federal and university coal related research facilities that otherwise would not be in the state

Other Aspects of the Coal Economy

• Reclaimed mine sites are home to: 4 industrial parks, 4 retail malls, 8 recreation facilities, 3 high schools, 3 correctional facilities, 2 airports, 2 residential developments.
• Boy Scouts “Bechtel Family National Scout Reserve” Fayette County
• FBI complex in Harrison County
   

Community Involvement

• Over 300 community projects, events and educational activities are financed and sponsored by WV coal companies
• These include school programs, sports, local fire/police/EMT, scholarships, fairs, foundations and festivals
• Support is both financial and volunteers
   

Policy Issues

• Declining coal production to 130.2 million tons in 2030.
• EPA limits on surface mining permits
• Cap and Trade Legislation (ACESA) calls for 83% carbon reduction by 2050
  - WVU study shows 22,700 fewer jobs by 2030
• Carbon Capture and Sequestration holds promise if technical and economic feasible.

Conclusions

• Coal is vital to WV’s economy
• Loss of coal production or substantial reduction due to taxes or regulation would worsen an already low income situation
• Demands for government services would increase while the capacity of government to provide them would dramatically fall.
   

Full Report Available

• Bureau for Business and Economic Research at West Virginia University at www.be.wvu.edu/bber
• Center for Business and Economic Research at Marshall University at www.marshall.edu/cber/research  

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